- Global economy continues to be burdened by U.S. tariffs and geopolitical uncertainty
- Germany and the eurozone expect slight growth
- Fed cuts key interest rates, ECB in sideways mode
Frankfurt am Main, December 3, 2025 – The 2026 global economy will remain influenced by geopolitical tensions and U.S. tariff policy. Fiscal stimulus measures in many countries are supporting economic activity, while government debt continues to rise. Germany and the Euro area are showing moderate signs of growth and inflation remains largely stable. Slight upward movements in long-term yields are expected on the capital markets.
This outlook reflects the assessment of our capital market experts Manfred Bucher (BayernLB), Ulf Krauss (Helaba), Thomas Meissner (LBBW), and Christian Lips (NORD/LB), who presented their projections for economic and financial market developments at a press briefing held by the Association of German Public Banks, VÖB, on Wednesday.
U.S. labor market losing momentum
For 2026, the experts expect continued moderate growth in the global economy, weighed down by U.S. tariffs and ongoing geopolitical uncertainties. Growth in emerging markets remains significantly above that of industrialized nations. In the United States, the government shutdown at the end of 2025 acted as a temporary brake on growth. U.S. labor market dynamics are expected to weaken overall in 2026, though without a significant rise in unemployment. U.S. GDP growth in the coming year is expected to range between 1.5 and 2.0 percent.
Leading indicators point to moderate GDP growth in the euro area
After a year marked by trade conflicts, the euro area could see renewed stability in 2026. Rising leading indicators and a fiscally loose policy stance suggest growth of 1.2 to 1.5% in the eurozone. Growth in Germany is expected to be within a similar range. Fiscal stimulus and private consumption are expected to provide support.
Fed to cut rates, ECB steady
The Fed is expected to implement several interest rate cuts over the course of next year. In contrast, according to the economic experts, the ECB is likely to keep key interest rates stable in a solid economic environment. Only BayernLB anticipates a slight upward adjustment of interest rates in the second half of 2026.
Yield curve to steepen
A significant steepening of the yield curve is expected in the U.S. Treasury market: short-term yields are likely to fall, while long-term 10-year Treasury yields will remain under pressure due to the high budget deficit and the inflation environment. In the euro area, long-term yields are also expected to rise, though they will remain at a considerably lower level. Toward the end of 2026, geopolitical developments, the Dutch pension reform, and the upcoming French presidential elections in 2027 will exert additional influence on the markets.